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Superannuation 'No TFN tax': Now is a great time to claim it back

As the end of the financial year looms, now is a great time for members of super funds to arrange to claim back any 'no TFN tax' paid on their contributions.

Paul Ellis

Tax (Legislation and Law)

When is no TFN tax payable?

A member of a super fund pays the 'no TFN tax' if:

their fund receives a super contribution for them; but

the fund does not have the member's tax file number (TFN).

In that case, the member's contributions are taxed at 30% more than they otherwise would be. So the 'no TFN tax' is 30% of their contribution.

Members are not compelled to provide their TFN to their super fund, but the 'no TFN tax' is a clear incentive to do so.

Which types of contributions are taxed?

The types of contributions taxed include:

Employer contributions;

Salary sacrifice contributions; and

Transfers from foreign super funds that are assessed as income of the fund.

Why aren't a member's post tax contributions taxed?

A member's own post-tax contributions are not taxed for the 'no TFN tax' because the member's TFN must have been provided to the fund for post-tax contributions to be made.

If after a fund accepts a member's post-tax contribution the fund realises that it does not have the member's TFN, then within 30 days either:

the fund must return the contribution to the member; or

the member must provide their TFN to the fund.

This also applies to any co-contributions.

Why is now a great time for members and super funds to claim back 'no TFN tax'?

The recent economic downturn makes now a great time to claim back 'no TFN tax'.

Curiously, claiming back the tax will put many members' funds in a better position than if they hadn't paid the tax. It's a simple calculation: members will receive the 'no TFN tax' back from the ATO dollar for dollar (that is, a 0% return). In recent years, a 0% return would have been a poor result. But in the last 18 months, it is likely to be a better performance than that of the rest of their fund.

A fund has a three year window during which it can apply to claim back the no TFN tax. This is further discussed below.

Who claims from who? Is interest ever payable?

Two types of claims can be made for 'no TFN tax':

Claim type 1: The super fund can claim the 'No TFN tax offset' from the ATO if a member whose contributions have been taxed for the 'no TFN tax' later provides their TFN to the fund. The offset is self-calculated for the income year in which the claim is being made.

Claim type 2: A member can claim interest on any 'no TFN tax' that was paid after they provided their TFN to their employer but because the employer failed to pass it on to the super fund. There is no time limit for claiming interest on overpayment of no TFN tax.

When may the claims be made?

A super fund's claims for the 'No TFN tax offset' must be made within three years of the end of the income year in which the 'no TFN tax contributions' were made.

A member's claim for interest on any 'no TFN tax' can be made any time. There is no time limit.

What is the employer's obligation about a memberÔ??s TFN?

If an employer receives the TFN details from a member, the employer is obliged to tell the employee's TFN to the member's super fund.

As has been discussed above, if the employer does not tell the super fund, then the member's super contributions will be taxed at far higher rates than might otherwise be the case.

Both employers, and employees, need to be vigilant on this issue.

Questions & more information

For questions or more information about the above article, please call Maddocks in Melbourne (03 9288 0555) and ask for a member of the Maddocks Superannuation Team.

Lawyer in Profile

Leigh Baring
Partner : 61 3 9258 3673

Leigh is a partner in the Maddocks Tax & Revenue team.

Leigh regularly provides advice on:

structuring of businesses and transactions;

mergers and acquisitions;

corporate reorganisations and distributions;

sale of businesses;

demergers;

capital raisings;

joint ventures and property developments;

international tax (both inbound and outbound);

succession planning; and

liquidations.

His advice covers both direct and indirect tax considerations.

Leigh advises Australian and multinational companies, high net worth individuals, accountants and financial advisers on all areas of taxation law.

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